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loss carryforwards of approximately $15 million that will expire commencing in 2023 through 2030. These carryforwards may be subject
to certain limitations on annual utilization in the event of a change in ownership, as defined by tax law. The Company has established
valuation allowances to fully offset the deferred income tax assets related to these loss carryforwards, based upon&#160;&#160;the
available evidence that indicates that it is more likely than not that the Company will not realize the tax benefits.</p><p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the Company&#146;s Amended and
Restated 1997 Stock Option Plan (the<i> &#147;Option Plan&#148;</i>), no further option grants are allowed after February&#160;26,
2007, but options theretofore granted remain in effect until satisfied or terminated pursuant to the Option Plan. No options were
granted under the Option Plan during the years ended December&#160;31, 2011 and 2010.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">At December&#160;31, 2006, all options
were fully vested; thus no further stock option expense has been recorded related to the Option Plan. The weighted-average remaining
contractual term, as of December&#160;31, 2011, was 4.80 years for outstanding and exercisable options. There were no options exercised
and none that expired or were canceled during the years ended December&#160;31, 2010 and 2011. As of December&#160;31, 2010 and
2011, there were 370,000 options outstanding under the Company&#146;s Stock Option Plan which are exercisable at a weighted average
price of $.21 until July&#160;18, 2016, when they expire.</p><p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During August 2010, the Company issued
800,000 shares of common stock for proceeds of $10,000.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During January 2011, the Company issued
1,083,333 shares of common stock for proceeds of $13,000. During April 2011, the Company issued 500,000 shares for proceeds of
$8,000.</p>
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to issue 1,500,000 shares to its officers, Jay Gottlieb and Gregg Schneider, at $0.016 per share for a total of $24,000.&#160;&#160;The
issuance provided cash of $19,000 and the repayment of $5,000 of Loans from officers. No other material subsequent events have
occurred since December 31, 2011 that require recognition or disclosure in the financial statements.</p><p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">Accounts payable and accrued liabilities as of December&#160;31,
2011 and 2010 consist of the following (in thousands):</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%">&#160;</td>
<td colspan="2" style="line-height: 115%">&#160;</td>
<td nowrap="nowrap" style="line-height: 115%">&#160;</td>
<td style="line-height: 115%">&#160;</td>
<td colspan="2" style="line-height: 115%">&#160;</td>
<td nowrap="nowrap" style="line-height: 115%">&#160;</td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%; font-weight: bold">&#160;</td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2010</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold">&#160;</td>
<td style="line-height: 115%; font-weight: bold">&#160;</td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2011</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; line-height: 115%; text-align: left">Legal and accounting costs</td>
<td style="width: 1%; line-height: 115%; text-align: right">&#160;</td>
<td style="width: 1%; border-bottom: black 1.5pt solid; line-height: 115%">$</td>
<td style="width: 9%; border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">9</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%">&#160;</td>
<td style="width: 1%; line-height: 115%; text-align: right">&#160;</td>
<td style="width: 1%; border-bottom: black 1.5pt solid; line-height: 115%">$</td>
<td style="width: 9%; border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">9</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%; text-align: right">&#160;</td>
<td nowrap="nowrap" style="line-height: 115%">&#160;</td>
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%">&#160;</td>
<td style="line-height: 115%; text-align: right">&#160;</td>
<td nowrap="nowrap" style="line-height: 115%">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%; text-align: left">Total</td>
<td style="line-height: 115%; text-align: right">&#160;</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">9</td>
<td nowrap="nowrap" style="line-height: 115%">&#160;</td>
<td style="line-height: 115%; text-align: right">&#160;</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">9</td>
<td nowrap="nowrap" style="line-height: 115%">&#160;</td></tr>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p><p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Reliability Incorporated Employee
Stock Saving Plan (the &#147;Plan&#148;) (As Amended and Restated Effective January&#160;1, 2000) was terminated effective November&#160;16,
2006, with all accounts fully vested as of such date. The Company filed the termination of the Plan with the Internal Revenue Service
to request a favorable letter of determination and notified all employees covered by the Plan of its termination, and their rights
to final payment thereunder. The Company received a favorable letter of determination from the Internal Revenue Service.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Plan allowed eligible United States
employees to contribute up to 100% of defined compensation to the Plan and to elect to have contributions not be subject to Federal
income taxes under Section&#160;401(k) of the Internal Revenue Code. The Company matched employee contributions to the Plan at
a rate equal to 50% of the employee&#146;s contribution, but the Company&#146;s matching contribution was limited to 2% of the
employee&#146;s defined compensation. The Company also made a voluntary contribution of an amount equal to 1% of the defined compensation
of all participants. The Company also contributed a profit sharing amount based on the&#160;&#160;profits of the Company. The maximum
profit sharing contribution was 5% of compensation. The Company registered and reserved 500,000 shares in 1992, and registered
and reserved 500,000 additional shares in 2001, of common stock for sale to the Plan. The registration statements cover shares
purchased both in the open market and from the Company. The Plan did not purchase any shares from the Company during the two-year
period ending in 2011. At December&#160;31, 2011, 354,300 reserved shares remain unissued under the 2001 registration statement.
There are no plans to issue the reserved shares as the plan has been terminated.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p><p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>GOING CONCERN</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. The Company has no operating activities and is now a
shell company. The Company has concluded that it should sell the company or identify a merger partner. There can be no assurances
that the Company will be successful in completing such a transaction or be able to maintain sufficient liquidity over a period
of time that will allow it to carry out these actions, in which case the Company might be forced to liquidate or seek protection
under the Federal bankruptcy statutes, or both.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Two of the Company's stockholder/officers
have advanced cash to the Company on a short-term non-interest bearing basis to pay for ongoing general and administrative expenses.&#160;&#160;As
of December 31, 2011, $5,000 had been advanced and was reflected as Loans from officers.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>BASIS OF PRESENTATION</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements have been prepared
in accordance with accounting principles generally accepted in the United States.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>ACCOUNTING ESTIMATES</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires that management make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those
estimates.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>CASH EQUIVALENTS</i></p>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For the purposes of the statements of
cash flows, the Company considers all highly liquid cash investments that mature in three months or less when purchased, to be
cash equivalents. Cash equivalents are stated at cost, which approximates fair value.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>STOCK OPTIONS</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Compensation cost relating to stock-based
payments, including grants of employee stock options, is recognized in financial statements based on the fair value of the equity
instruments issued. The Company adopted the modified-prospective method. Under this method, the Company recognized the fair value
of stock-based compensation awards as compensation expense in its statement of operations on a straight line basis, over the vesting
period, for awards granted after January&#160;1, 2006.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>INCOME TAXES</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Deferred income taxes are provided under
the asset and liability method and reflect the net tax effects of temporary differences between the tax basis of assets and liabilities
and their reported amounts in the financial statements. The Company establishes valuation allowances when the realization of specific
deferred tax assets is subject to uncertainty. The Company records no tax benefits on its operating losses, as the losses will
have to be carried forward and realization of any benefit is uncertain.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>EARNINGS PER SHARE</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Basic earnings (loss) per share is computed
by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Since the Company generated net losses in 2011 and 2010, outstanding stock options would have been
anti-dilutive and were not considered in these calculations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>FAIR VALUE OF FINANCIAL INSTRUMENTS</i></p>
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and accrued liabilities, and loans from officers at December 31, 2011 and 2010 approximated fair value due to their short maturity
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